Less-than-truckload carrier Yellow Corp. sent a letter to President Biden on Thursday asking for help negotiating with the Teamsters. The letter said the company is “on the verge of closing its doors due to an ongoing, intractable labor dispute with the International Brotherhood of Teamsters (IBT).”
“Despite support from your Administration, these efforts have proven unsuccessful at getting both sides to the table to discuss a way forward,” the letter pleaded.
Yellow (NASDAQ: YELL) is trying to implement a second phase of operational changes it says are paramount to its survival. The plan includes consolidating its LTL operating companies, closing redundant terminals and redefining work rules for some drivers, among other items. The carrier was successful installing a first phase of changes in the West, however, a second phase covering 70% of its network has been shot down by the union.
Seemingly out of options, the company filed a $137 million breach of contract lawsuit against the IBT on Tuesday.
“As a result of union intransigence, Yellow’s business plan has been frozen,” the letter continued. “The company has lost market share and has been unable to secure additional lending for day-to-day business operations.”
Yellow has $1.5 billion in debt and lease financing obligations, $1.3 billion of which comes due next year. Of that, $700 million came from the U.S. Treasury in the form of a controversial COVID-relief loan. In addition to collateral for the loan, the government received a 30% equity stake in Yellow, which the letter warns would be “wiped out” if the company goes under.
However, a precipitous decline in YELL shares given its inability to reach a deal with Teamsters has made that equity worth less than $11 million, a far cry from the $729 million loan balance it has with the government (balance includes capitalized interest).
The letter said 30,000 jobs (22,000 Teamster jobs) are at risk and that its $5.2 billion in annual revenue supports another 57,000 jobs.
The two parties have reached a stalemate in recent weeks.
Throughout the process, the union has maintained it has given enough. Since 2009, it estimates it has conceded billions in wages, benefits and pension concessions. Most recently, the union said it will honor its current collective-bargaining agreement, which expires March 31.
Yellow asserts the Teamsters don’t have the right to reject the change of operations and says it will be out of money by mid-July if its plan isn’t implemented. The company recently asked health and pension funds to defer contributions for the months of July and August.
“We continue to see less potential for another government bailout, given a recent congressional report saying the Treasury Department erred in giving a loan to YELL as part of a 2020 rescue package,” Deutsche Bank (NYSE: DB) analyst Amit Mehrotra told clients Friday morning.
Analysts have been sizing up the carrier’s failure and the fallout it would have on the industry. Mehrotra said other carrier’s “have the extra capacity to take on additional freight.” He thinks the event will raise LTL rates industrywide.
“Knowing of your strong commitment to union jobs, we are formally requesting your assistance in getting Yellow and the Teamsters to the table,” the letter concluded.
More FreightWaves articles by Todd Maiden
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The Cat has 10 lifes
Chief Logistics Officer have you contacted the Sales team? Often the individual terminals will see a downturn in freight and simply assume it’s a seasonal or market downturn and wait it out, but if you contact the sales team they should react. I would be shocked if they didn’t. I’m sure your loyalty to the brand has been, will be appreciated.
Chief Logistics Officer
As a 35 year loyal customer to the Yellow umbrella I am more than disappointed that I have not had any communication from anyone at Yellow concerning my $1 million plus a year business. We have pulled all of or shipments and directed them elsewhere and no one from Yellow has reached out. I find that mind boggling.
I want everyone to keep their job. I want to still be loyal. Yellow is making it difficult for me to continue to be loyal.
HOLLAND DRIVER
Both sides must get to the table asap . this is stupid
Wake up Yellow Teamster Members
This is a wake up call to all yellow Teamster members! Sean O’Brien has no intention of allowing our company to survive!!! We need to file a class action lawsuit for failure to perform fiduciary responsibilities! It is the Union’s job to be at the table and negotiate for its members and they are failing to do that we need a class action lawsuit it’s time for us to unite and get into court!
35 Year Yellow/Roadway/YRC Employee
After 35 years at this company as a clerical and managerial employee my viewpoint is that the leadership level at both sides is the real problem not those who actually work at terminals. Both YRC and IBT are beating their chests about the other side and dont give a damn about those who have and will be affected. Best solution is to negotiate a new national contract throwing out all the old local sweetheart deals and configure the company into a model that can be profitable even with higher labor costs. Utility drivers are a required part of this while still protecting linehaul and dock jobs. It wont happen, it never has in the past and honestly neither side wants a fair to all parties contract.
While the IBT talks about 15 years of give back they ignore the sacrifice made by the non union employees be they clerical or managerial. No paid medical, no retiree medical, pensions frozen, no wage increases for 10 years, all the while the union workers received all of this. When I left in 2016 I was managing four of YRC’s union call centers (all the non union roadway locations gone since 2008) and was making less than $60,000 a year. People said I was foolish to stay, however I felt that I was not only responsible for those who were assigned to me but I was even more so responsible to them and did all I could to protect them from corporate and ibt harassment and stupidity. I have no regrets for how I managed and neither do those team members I communicate with. We took care of each other and our customers which does not seem to be a concept that either sides leadership understands.
I’m not bitter, just sad to see what all the rank and file union or non union gave up for so long being in vain. This company should have closed their doors a few years back instead of being floated by a corrupt government who bailed them out for political not practical reasons.
Best thing for everyone would be to lock the doors as did CF and put an end to this travesty.